When Ronald Read died in 2014 at the age of 92, even his family was surprised to learn about his hidden wealth. Born to a poor family in Vermont (USA), Read served in the U.S. Army during World War II, then led a simple life as a gas station attendant and janitor before retiring in 1997. Read was known for a frugal lifestyle—wearing fraying clothes, driving a used Toyota, and cutting his own firewood. No one had any idea he had amassed an $8 million fortune by investing in the stock market.¹
Many young people in Europe find themselves starting from similar conditions as Read: Their paychecks have fallen behind other age groups since the financial crisis of 2008. Today, they make up the largest group among the unemployed, underemployed, or working poor, and hence are the most at risk of poverty.² In short, for the young salaries won’t go as far as they used to. But, just like Read, they have the power to rewrite their own stories.
So, how can you boost your income and build a buffer against poverty when you’re young? The stock market can offer an out, just like it did for Read. At first glance, with the market’s daily ups and downs, investing can seem like you’re trying to wrestle a lion. But look more closely, and you might see that the lion has fewer teeth than you thought. In the long term, markets have gone up: $100 invested in the top 500 U.S. stocks in 1928 would have been worth over $787,000 in 2023.³
But, how do you know what to invest in?
The problem with stock investing is that you don’t know which companies will be successful. For every Nvidia or Tesla, there are many more that fail. And this is not a “you” problem—most investors, pros included, can’t beat the market. That’s why they are better off not betting everything on a single roll of the dice but placing many smaller bets instead.⁴ This problem is so common that investment firms have developed a solution called index funds.
Index funds mirror the performance of a stock index—a group of stocks that represents the performance of a specific market. A well-known index is the S&P 500, which tracks 500 of the largest U.S. companies, including brands such as Apple or Amazon. By investing in an index fund, investors place bets on all companies included, effectively spreading their risk. One type that’s become increasingly popular are Exchange Traded Funds, or ETFs.
True to their name, ETFs are traded on an exchange, which means you can buy and sell them just like you would a regular stock. ETFs became popular for two reasons: They let everyone take part in the stock market, and they have lower costs compared to other investments.
Let’s say you wanted to buy stocks for all S&P 500 companies directly. You’ll quickly find out that buying one share each of just the top ten companies would cost you more than $3,000 (as of October 2024). It’s clear that this is out of reach for many. ETFs that track the S&P 500, on the other hand, let almost everyone place a bet on these 500 companies—many brokers have low or even no minimum investments.
Costs follow a similar logic. Every time you buy or sell an investment, you’re paying fees. If you’re making many investments, these fees add up quickly. With ETFs, you’re making a single investment instead, so you’re saving money. And since ETFs passively track an index, their management fees also are lower compared to actively managed funds.
All it takes is a small but regular investment
Now let’s talk about how you can make the most of your ETF investment. As we’ve seen, the stock market can bounce up and down like a rubber ball from one day to the next. But over long periods that rubber ball is hopping up a hill as markets are going up. If you’re young, you have plenty time to ride out bumps in the road, and even big market crashes. What’s more, holding your investment for a long time also means you’ll benefit from two strong effects that can boost your returns.
Remember how a mere $100 invested in 1928 became $787,000 in 2023? That’s due to compounding. It means the money earned from your investments is earning you more money, without you doing anything. This is like your cat having four kittens, who then have four kittens each, who again have four kittens each. The longer this goes on, the more cats you’ll end up with. It’s the same with investments; the earnings are reinvested and generate additional earnings. Being young means you might not start with a lot of money, but what you have is the time to watch your investments grow faster and faster while compounding works for you.
Ok, so we know investing is a good way to build wealth. But when’s the best time to start? After all, you don’t know which way the stock market will move. Here’s where cost averaging comes in. If you regularly invest the same amount in the ETF, whatever the price, the market will outgrow your average buying price. And while it might feel wrong to invest in a tumbling market, the opposite is true: So long as you hold your shares, you’ll profit from the lower buying price as soon as the market rebounds above your average price.⁵ Simply put, cost averaging is a very beginner-friendly variation of the old “buy low, sell high” strategy. So stop second-guessing the market, and get your regular investment off the ground today.
Growing money, step by step
As you can see, there’s a way for young investors who have time, but not much money. If this is you, here’s how you can get going:
- Look at how you spend your money. Can you shift some of your fun money to investing? Say, skip a night out with friends once a month? This could be your sweet spot to start investing.
- Talk to like-minded people. Do you have friends or family who are into investing? Discussing your plans can help you build confidence.
- Find an investment platform and ETF that you trust. Investing has shifted to online, and you can do everything from the comfort of your couch. Ask your friends for ideas, or check comparison websites.
- Get started with a monthly amount that feels right. You can add more once you get the hang of it.
This brings us to one last hurdle to clear before the goal line: ETFs have become so popular that over 10,000 exist today.⁶ How do you find the right one? You can ask the internet by googling “ETF screener”, going to one of the top pages, and using the tools there to narrow down your options. But there’s a simpler way—one that lets you set up your ETF while watching Netflix instead of wasting hours trying to coax information from the internet.
Some investment platforms now have ready-made offers to help people start investing in ETFs. One of them is Mintos with its Core ETF. Getting one is like trying out that new curry place, but not knowing what to order. So you call them, and they ask you a few questions to see what you might like. Do you have allergies? Do you eat meat? Do you like it spicy? And then they come back: Hey, you might like this Madras curry. That’s how Mintos Core ETF works—answer a few questions, get an offer that matches your goals and risk level. If this sounds good, head over and take a look.
Just don’t put off investing for too long: Whatever platform you go with, the most important decision is to start investing today. And maybe, just maybe, you could build a fortune like our friend Ronald Read.
1 Fox, M. 2015, February 9: Here’s how a janitor amassed an $8M fortune. CNBC. Available: https://www.cnbc.com/2015/02/09/heres-how-a-janitor-amassed-an-8m-fortune.html
2 Chen, T., Hallaert, J., Pitt, A., Qu, H., Queyranne, M., Rhee, A., Shabunina, A., Vandenbussche, J., Yackovlev, I. 2018: Inequality and Poverty across Generations in the European Union. Available: https://www.elibrary.imf.org/view/journals/006/2018/001/article-A001-en.xml?ArticleTabs=fulltext
3 Damodaran, A. 2024: Historical Returns on Stocks, Bonds and Bills: 1928-2023. Available: https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
4 Malkiel, B. 2015: A Random Walk Down Wall Street. New York: W. W. Norton & Company.
5 Cacace, K. 2024: Cost-Averaging: How it helps ETF Investing. Available: https://www.justetf.com/en/academy/cost-average-effect.html
6 Statista. 2023: Number of Exchange-Traded Funds (ETFs) worldwide from 2003 to 2023. Available: https://www.statista.com/statistics/278249/global-number-of-etfs/#:~:text=Number%20of%20ETFs%20globally%202003%2D2023&text=
There%20were%2010%2C319%20ETFs%20globally,over%2011%20trillion%20U.S.%20dollars.
